Embracing the unexpected

Learn why the Bubbles Hand Car Wash chain of Houston, TX, made a surprising turn into the express market.

Sometimes, the sky is clear, winds are low and the waters are calm; the conditions are optimal for smooth carwash sailing. Other times, clouds gather, waves crash and storms bluster. Frequently, the difference depends on navigation. When surrounded by building storms and choppy seas, many owners appear all-too content to stay the course and inevitably go down with the ship. Yet, others stand ready to take a risk and steer their businesses into clear, safe waters.

As many operators have learned, even in the best conditions, navigating the ebb and flow of the carwash industry can be a massive challenge. The most successful owners understand the need for flexibility, and they do their best to prepare for a few unexpected turns. Though a course has been charted, these owners realize that their business’ survival depends on the ability to navigate and change directions in response to different challenges in the car care market.

A tale of two formats

One carwash company that flourished before and after a surprising turn is the Bubbles Car Wash chain in Texas. Today, Bubbles operates 13 locations in Houston: Five hand tunnel washes and eight express tunnels. According to Chairman Bill Lawrence, the earliest concept for Bubbles was a chain of luxury, high-end hand washes.

“I was intrigued by the carwash business. But, having owned a nice luxury car, was hesitant about taking it through the carwashes with all the bristles,” Lawrence explained. “Back then, we didn’t even have soft cloth; it was bristles and things like that. And I came up with the idea of building a conveyorized hand wash.”

In the early 1990s, the basic business plan was to attract mainly high-end customers who drove expensive luxury cars. The first Bubbles Hand Car Wash, opened in 1991, was created to be the “Neiman Marcus of carwashes,” Lawrence stated. Over the next 10 years, four more Bubbles Hand Car Wash locations were added.

After 14 years of operation in the labor-intensive hand wash format, Bubbles’ management decided to alter their course and enter the express carwash market. In 2005, the first Bubbles Express Wash opened. “We saw the market leaning towards an alternative means of washing, and by that I mean not every customer needed a full-service wash every single time they washed their car,” Lawrence said. “We just felt that if we didn’t start building some exteriors, someone else would fill the void in the market.” Seven more Bubbles Express Washes have been added over the past seven years, with the newest location opening just last month.

Help from Houston

Bubbles has the advantage of being based in Houston, one of the largest cities in the U.S. Bubbles locations are lucky to call this metropolis home because the washes can draw from, and market to, its huge population. Even though Houston is large, it is still a very competitive carwashing market. Lawrence noted that, at last count, there were approximately 175 conveyor washes in the city. With this much competition, how does Bubbles decide where to locate new carwashes so that they have the best chances of success?

“Well, we’ve spent a number of years working with a real estate market research company that has profiled our more successful locations,” Lawrence said. “When we find a location we like, they go ahead and run all the metrics on that location and can usually come within 2 to 3 percent of annual revenue. And then we decide, at $700,000 a year revenue, can we spend $3 million and make money. And it’s either a yes or a no.”

Still, the number one concern when it comes to new locations is competition. Bubbles management definitely tries to look for and build in underserved markets. Lawrence revealed that current plans call for Bubbles to add another one or two hand washes in high-demographic areas. On the express wash side, Bubbles hopes to build another five to 10 locations before the city is saturated.

Steps for continued success

Lawrence stated that the most important factors to Bubbles’ success have been site investments, equipment updates and the company’s selective hiring practices. Over the years, the chain has reinvested a lot of earnings into the different locations, and Bubbles is constantly improving its facilities. The chain also spends a lot of money recruiting and training the right employees. “We have some pretty high standards, and if you don’t fit those standards, we usually take a pass,” he said.

These steps make it easier for Bubbles locations to deliver what is most important: Quality to the customer. Lawrence pointed out that it is hard to deliver a clean car consistently if a wash has equipment that is constantly breaking down or if a manager just hires the next person that walks in off the street. Thus, Bubbles’ continued investment in capital improvements and high standards for associates allows the washes to provide exactly what customers want — a clean car in an efficient and affordable manner.

Turning to technology

Another secret to Bubbles’ success has been the use of up-to-date computer technology that increases efficiency and improves communication. In 1995, Bubbles management first put computers in all of the hand carwash lobbies so that customers could surf the Internet while they waited for their cars. Soon after this addition, Bubbles installed an email server to allow the wash managers and corporate staff to communicate electronically. Next, Bubbles created its own private wide-area network. Lawrence noted that this fast and secure network allowed management to control on-site carwash computers remotely, as if they were located in the next office.

About eight or nine years ago, the carwashes graduated to an IP-based phone system as well. With Bubbles’ IP phone system, a new location can be brought online, and the only connection expense is a $95 IP phone. To add a new location, the company does not have to pay for another dial tone or request service from a phone provider. Instead, the phone is simply plugged into Bubbles’ network and assigned an extension. Then, the manager has immediate quick-dial access to voicemail, conference calling, corporate offices and other Bubbles locations. The company has realized big savings using this IP phone system, according to Lawrence.

“We keep on embracing more and more technology and incorporating it into our business,” Lawrence said. “We put in a document management system almost 10 years ago [and] we now have our remote locations, our store managers, scanning documents into our system, almost eliminating the need to transfer paper back and forth between the stores. We’ve computed that just the document management system itself saves us anywhere between $30,000 and $40,000 a year.”

This calculation is based on Bubbles needing a full-time file clerk to do nothing but file away documents, Lawrence stated. Now, every corporate document can be handled electronically, including:

Invoices;

Reports;

Weekly summaries;

Correspondence; and

Packing slips.

Marketing methods

The foundation of Bubbles’ dedication to technology formed almost 17 years ago when the chain first shifted all of its marketing efforts to database marketing. Today, most of the chain’s special offers and all of its marketing campaigns are directed to their existing database of customers. According to Lawrence, Bubbles currently has a database of about 350,000 to 375,000 customer names and addresses. About 100,000 of these database listings also include the customer’s email address.

When it comes to marketing, Lawrence explained that Bubbles basically has three different types of customers. First, there is the infrequent customer that is only going to wash his or her car once every six months no matter how dirty the vehicle gets.

Next up is the club plan customer. This customer does not want to commit to a long-term or perpetual investment, but he or she likes being part of a group and saving money. To keep the club plan customers happy and loyal, Bubbles has created an “affinity club” where they receive occasional discounts and special offers.

Finally, there are loyalty and unlimited customers who purchase pre-paid wash books or sign up for Bubbles’ monthly credit card charges. “We look at them both as being loyalty programs. When a customer has a book of five tickets sitting on his center console, you know he’s going to be loyal to you for his next five visits,” Lawrence said. “But that’s a different customer than the customer who is going to sign up for a monthly unlimited plan and agree to have his credit card charged every month.”

Bubbles has also turned to social media as another tool for marketing the chain. About four years ago, the business noticed the emergence of Facebook as a place where Bubbles’ employees and management could interact with customers in a unique way. The company posts frequently on its Facebook page, and the posts are sometimes nothing more than jokes of the day or on-site carwashing pictures. “The more we engage our customers, the more posts we put up, the more we interact, the more our customers engage with us,” Lawrence said. “And we’ve done the same with Twitter. We have somebody in our office whose job it is just to monitor and post and interact with our customers on Facebook and Twitter.”

Future challenges

Bubbles is currently taking steps to navigate beyond challenges in the future as well. One challenge that the carwashes have met head on is increased OSHA enforcement. The chaincurrently employs a company that visits once a quarter and performs OSHA inspections at the carwashes. “We’ve been able to stay ahead of that curve. We take it seriously and it’s worth the investment because they’ll point out things that could come back and potentially represent a liability,” Lawrence said.

The biggest challenge that Bubbles now faces is how to deal with the new healthcare legislation. When the federal healthcare regulations take effect in 2013, businesses with more than 50 employees must offer an affordable healthcare plan and must pay for a portion of the premiums, according to Lawrence. If a company does not offer health plans, it will be penalized $2,000 per employee. Bubbles currently has about 225 associates who do not qualify under the defined benefit plan. Here, 225 employees times the $2,000 fines equals $450,000 in potential penalties.

In this instance, smaller carwash operations will operate at an advantage over the larger chains and operations. Bubbles will be competing head-to-head with carwashes that do not comply to the legislation because they have fewer than 50 employees, Lawrence stated.

“We’re not sure that we’re going to be able to keep all of our full-time associates. We may have to transition to a part-time company,” Lawrence noted. Moving forward, this part-time shift may cause two problems for the carwashes. First, Bubbles will have associates who do not have health insurance by their own choice. Next, the converted part-time associates will have had their annual wages reduced by 25 percent, going from 40 hours to 30 hours.

Moving forward, Lawrence thinks the entire full-service industry, due to the nature of the workforce and the seasonality of the business, will struggle to meet the challenges of the health care legislation. “Right now, that’s our number one focus and our number one concern. We’re taking care of business. We’ve got good technology. We’ve got great associates. We’ve got great car counts. Texas is enjoying a very robust economy. But all of that’s going to go for naught if we have to start paying $450,000 a year more in penalties and fines,” he concluded.